Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan. I'm a senior editor at
Speaker 1: Bloomberg and i'm Data higher Across Asset reporter with Bloomberg.
Speaker 1: This week on the show, Well, just when it looked
Speaker 1: like the crypto market had stabilized following the massive blow
Speaker 1: up of the Terra ecosystem earlier this year, here comes
Speaker 1: another big blow up, this one arguably more surprising and
Speaker 1: even more systemically important to the whole industry. Sam Bakman
Speaker 1: Fried's FTX Exchange. Now, before this, he and his firm
Speaker 1: were long considered one of the most stable cornerstones of
Speaker 1: the industry, with the third year old billionaire known as
Speaker 1: FBF even being described as the JP Morgan or Warren
Speaker 1: Buffett of digital assets. Even if you've never even dabbled
Speaker 1: in cry though you've probably watched f t X is
Speaker 1: funny Super Bowl ad with Larry David, we're seeing FBF
Speaker 1: paddling around with Tom Brady, or maybe you noticed the
Speaker 1: f t X logo on the chest of Major League umpires.
Speaker 1: So what does it mean for the market when such
Speaker 1: a high profile pillar of the industry collapses in a
Speaker 1: matter of days. We'll get into it with the chief
Speaker 1: executive and the chief investment officer of a quantitative crypto
Speaker 1: hedge fund. But first, fil Donna. You know before every
Speaker 1: podcast you write down like forty seven questions to ask.
Speaker 1: I have so many, so many questions. Now we had
Speaker 1: we actually had SPF himself on this podcast, and I
Speaker 1: noticed you never asked him like, hey, SPF, when's your
Speaker 1: thing going to blow up? Well? That but that's the
Speaker 1: thing about his whole company is that everybody thought they
Speaker 1: were going to be I mean, they were like the
Speaker 1: gold Star right. And I'll confess I had a do
Speaker 1: quan on the podcast one week when it did not
Speaker 1: occur to me to ask him, when's your thing going
Speaker 1: to blow up? Hopefully no more blow ups. I'm blushed.
Speaker 1: People can't see me, but I'm blushing. But you know what,
Speaker 1: the thing is, in crisis, there's opportunity when stuff blows up.
Speaker 1: Sometimes traders make the most of it. Yes, I do
Speaker 1: want to bring in our guests. This is the perfect
Speaker 1: week for us to be talking to them. I'm really
Speaker 1: excited to have them on. We have Sadie Rainey. She's
Speaker 1: a co founder and CEO of Stricks Leviathan and Nico Cordero,
Speaker 1: he's a ce IO at the company. Welcome to both
Speaker 1: of you, and thanks so much for joining us on
Speaker 1: this week's show. Thanks for having us. It's really nice
Speaker 1: to be here. Despite this week likewise, great to be here.
Speaker 1: It's definitely a rough week, and I do want to
Speaker 1: get into um all about you guys, and um what
Speaker 1: you do and how you're faring and what this week
Speaker 1: has like has been like for for both of you
Speaker 1: and for your teams. But maybe Sadie, we just start
Speaker 1: start with you and and I'm hoping you can just
Speaker 1: lay out for our audience what exactly happened this week?
Speaker 1: What were some of the major factors the major players involved.
Speaker 1: So great question. I think that's actually the question that
Speaker 1: everybody's trying to figure out right now. What what did
Speaker 1: happen or what is happening? And the big big issue
Speaker 1: here is really I don't think we have all the
Speaker 1: pieces of of information. And really it started at the
Speaker 1: end of last week when there was some back and
Speaker 1: forth between Finance and f t X on Twitter. You know,
Speaker 1: there was a lot of I guess allegations going around,
Speaker 1: which there was an immediate response from f t x um,
Speaker 1: you know, kind of that everything's fine, We're all fine, um.
Speaker 1: And then suddenly, you know, there was very clear signs
Speaker 1: of distress um for f t X in the market,
Speaker 1: and Finance came forward with an offer to acquire or
Speaker 1: bail out f t X more or less, which was
Speaker 1: very quickly rescinded um. And in that whole process there
Speaker 1: was a large run on f t x um which
Speaker 1: dried up their liquidity, leading to them freezing withdrawals. And
Speaker 1: now there is a very aggressive attempt by f t
Speaker 1: X too finds a solution to their liquidity so that
Speaker 1: they can make their investors whole. You know. Also, if
Speaker 1: i'd be curious if did this catch you guys as
Speaker 1: much of a surprise as it did the rest of us. Yeah,
Speaker 1: it did to be frank, I mean, the speed of
Speaker 1: which we turned from you know, small rumors on the
Speaker 1: internet that didn't seem to have validity into f t
Speaker 1: X freezing accounts was all in a span of about
Speaker 1: thirty six hours. And like you mentioned in the opening,
Speaker 1: you know, f t X was largely considered the most
Speaker 1: trustworthy institutional player in the space outside of the us
Speaker 1: UM so not including coin base and others. Um, so, yeah,
Speaker 1: I think it was. It was. It was quite a shock, um,
Speaker 1: and a lot of folks are surprised and angry rightfully. So, yeah, Nicole,
Speaker 1: I imagine it's and and city. I imagine it's impossible
Speaker 1: to run a crypto hedge fund without having some sort
Speaker 1: of exposure to ft X, you know, either as a
Speaker 1: client or counterparty in some ways. It is it creating
Speaker 1: any issues for you guys, Yeah, I mean it is
Speaker 1: difficult to not have exposure to them, you know, within
Speaker 1: the US. You know, preferably we'd like to keep our
Speaker 1: capital in the US under US regulated exchanges. But if
Speaker 1: you want access to derivatives, perpetual futures and capital efficiency
Speaker 1: through the type of instruments that are offered offshore, you like,
Speaker 1: you have to be off shore, you know. So we
Speaker 1: were there. We're a counter party to them. We do
Speaker 1: have some funds frozen there. It's not the best of situations,
Speaker 1: but luckily for us, we are, you know, place a
Speaker 1: large emphasis emphasis on risk management, and so we only
Speaker 1: had a small portion of our portfolio allocated there, simply
Speaker 1: because this space is the wild West, and you know,
Speaker 1: you expect these things that happened just not to ft
Speaker 1: X any communications or indications of of one n F
Speaker 1: you'll be able to withdraw funds. At this time, it's
Speaker 1: a very fluid situation. We're not sure you know what's
Speaker 1: happening behind the scenes. And Sady, maybe you can talk
Speaker 1: about just the significance of the events, because we've been
Speaker 1: we've been talking about how it's been a rough week.
Speaker 1: Obviously crypto markets tanked at one point during the week
Speaker 1: it seemed like the horrible sentiment from crypto also had
Speaker 1: spilled over into the equity space where we saw the
Speaker 1: SMP five hundred also selling off. Just what is the significance, Like,
Speaker 1: how momentous of what unfolded over the past couple of days.
Speaker 1: How momentous is it? It's really momentous in this situation.
Speaker 1: You know, we've been through a number of market crashes
Speaker 1: and you know, in the past have also traded with Voyager,
Speaker 1: or we've used Voyager, not for trading, but we've used
Speaker 1: Voyager in the past. We also use block Fire, and
Speaker 1: when there were some indicators that maybe there they were
Speaker 1: I guess you could say over over their skis um,
Speaker 1: we stopped trading with them, you know, well ahead of
Speaker 1: of what happened last spring, and this one I don't
Speaker 1: think anyone saw coming. You know, it was really quick
Speaker 1: how it happened. It was really fast. And I was
Speaker 1: actually speaking at coin al It's last week up in
Speaker 1: San Francisco on Thursday, ironically, and one of the topics
Speaker 1: I too talked about was risk and how you know,
Speaker 1: the reason people love this industry is because the crazy
Speaker 1: returns you can get, but you know, you pay for
Speaker 1: that with with risk, and you have risk across every avenue,
Speaker 1: and counterparty risk is just one of those risks. So
Speaker 1: you really have to make sure that you're looking at,
Speaker 1: you know, all the areas out there, um, and you're
Speaker 1: never literally putting your eggs in one basket because you
Speaker 1: can never be sure at this stage that everything is
Speaker 1: what it what it looks like it is on face value.
Speaker 1: Was it also much more shocking considering that we basically
Speaker 1: had like weeks or even months of a very I
Speaker 1: guess we could call it a calm market where we
Speaker 1: really didn't see prices searching or plunging in any way,
Speaker 1: but just like meandering for a really long time. Yeah,
Speaker 1: I mean that's exactly correct. I mean, from the outside
Speaker 1: looking in, it looked like crypto was stabilizing, has sort
Speaker 1: of forming a foundation from which to find strength after
Speaker 1: the chaos of May and June um and things were
Speaker 1: starting to trend, you know, upwards again. Things you're starting
Speaker 1: to look um like crypto used to look in the
Speaker 1: early bowl markets. And then obviously everyone was sidewiped by
Speaker 1: this revelation that you know, very few if anyone, saw coming,
Speaker 1: you know, city, I know sort of one of the
Speaker 1: appeals of quant investing is that, you know, you let
Speaker 1: the math do the work and you sort of take
Speaker 1: out the human emotion of things. So this strikes me
Speaker 1: as something that you know, even a quant strategy is
Speaker 1: going to struggle with just such an out of the
Speaker 1: blue occurrence. So I'm curious if you could talk about
Speaker 1: some of your strategies. Um, I know, you have a
Speaker 1: market neutral strategy that in theory, you know, should be
Speaker 1: able to weather a type of collapse in prices like
Speaker 1: this better than a sort of on only or levered
Speaker 1: up long strategy. How does this type of event affect
Speaker 1: a quant um is it is it the type of
Speaker 1: thing that you're just you know, as clueless as everyone else,
Speaker 1: or is you know, is there something about being a
Speaker 1: quant in the space that allows you to navigate it
Speaker 1: a little better. Uh. In general, yes, we I definitely
Speaker 1: believe we can navigate a lot of these incidents much
Speaker 1: more efficiently than than a lot of our I guess
Speaker 1: a lot of our comrades out there. But really, you know,
Speaker 1: quant is non human. Uh. You know, it's it's looking
Speaker 1: at the data, it's it's trusting the data. And but
Speaker 1: you have to set up your system with a very
Speaker 1: risk oriented mentality. So you have to you have, the
Speaker 1: computer can can only be as good as as you
Speaker 1: let it be in those situations. And you can't just
Speaker 1: listen to everything that your your signals say. You know,
Speaker 1: you have to set it up so that you are
Speaker 1: mitigating risk. Do you always have to have multiple counterparties
Speaker 1: in these this industry, you can't. You can't trade with
Speaker 1: just one one place. You also have to make sure
Speaker 1: that you have you know, we set maximums for any
Speaker 1: one counterparty. Um. So even though prices might be the
Speaker 1: best in trading, might be might be the most profitable
Speaker 1: with one exchange, We're not going to put eight of
Speaker 1: our funds there. We just we just won't. We're not
Speaker 1: willing to do that. And you know, so our portfolio
Speaker 1: has limits per per trading partner, it has overall limits
Speaker 1: for signals. You know, we are a long short fund
Speaker 1: and our main fund, our system will only go to
Speaker 1: a certain percentage short, so you know, it doesn't matter
Speaker 1: what the market looks like UM, and if all of
Speaker 1: our signals wanted to short it, we still wouldn't short.
Speaker 1: We'd only shot up to UM the threshold percentage. So
Speaker 1: you know, you have to really make sure that your
Speaker 1: guard rails are set in place for for a quant fund.
Speaker 1: And then you know, having different strategies definitely helps. Having
Speaker 1: a market neutral d FI fund helps in this situation. Having,
Speaker 1: you know, our d FI fund was you know, has
Speaker 1: you know so far been completely unaffected by this because
Speaker 1: it's self custodied UM using decentralized exchanges, so we don't
Speaker 1: have the centralized party risk of somebody mishandling our our
Speaker 1: funds without us knowing it. So the system, though again
Speaker 1: I'm just being repetitive, but the system is only as
Speaker 1: good as as what you train it to be. I'm
Speaker 1: sure you guys don't want to sort of give up
Speaker 1: the ingredients of the secret sauce or anything, but I'm
Speaker 1: curious what sort of some of the main elements are
Speaker 1: of your strategies and I'm guessing trend following and momentum
Speaker 1: plays a big role. Yeah, and the flagship funds, you know,
Speaker 1: that's trects. We have systematic in nature, takes direction or
Speaker 1: exposure both on the lawn and short side. We have
Speaker 1: a mixture of trend momentum, cross sectional momentum us really
Speaker 1: plain relative value across the assets that we trade, as
Speaker 1: well as some idiosyncratic signals that are that we found
Speaker 1: about unique market structure within crypto. UM you know, would
Speaker 1: pick up the bulk of the of the systematic fund
Speaker 1: and then on the market neutral with DeFi yield funds.
Speaker 1: You know, that's largely driven by yield opportunities with a
Speaker 1: with a heavy risk overlay being able to hedge out,
Speaker 1: you know, crypto data exposure in uh you know, a
Speaker 1: crypto native way entirely on chain without having to interact
Speaker 1: with centralized counterparties. So, Nico, can you actually talk more
Speaker 1: about your market neutral fund, because this is something I
Speaker 1: had been writing about over the summer when UM well
Speaker 1: and also earlier in the year we had crypto prices
Speaker 1: crashing in May and June and what market neutral strategies
Speaker 1: do is they tend to hold up better during those times. Right,
Speaker 1: So maybe can you just lay out for our audience
Speaker 1: what is the market neutral strategy and how is it
Speaker 1: faring on during weeks like the one we just had. Yeah,
Speaker 1: so market neutral in this sense is we have some
Speaker 1: exposure to crypto price movement through the assets that we're
Speaker 1: holding within a variety of decentralized that change and other
Speaker 1: defy protocols. But then we utilize hedging strategies to net
Speaker 1: out that price exposure. UM. So that way, you know,
Speaker 1: if ethereum goes up, um, you know, our long holdings
Speaker 1: and ethereum go also go up, but are short exposure
Speaker 1: goes down and it kind of nets out. There's more
Speaker 1: to it than that, you know, it requires real time
Speaker 1: rebalancing to account for impermanent loss and and other issues
Speaker 1: that arise onto centralized of changes. But in a nutshell,
Speaker 1: that's how it works. So does this event this week?
Speaker 1: Will it change your strategies going forward? Change the way
Speaker 1: you do business? You know, it sounds like in a
Speaker 1: way you were, you know, sort of prepared for something
Speaker 1: like this to happen, you know, limiting your counterparty exposure
Speaker 1: and that sort of thing. But what's is there a
Speaker 1: lesson learned that that you'll carry for forward from this
Speaker 1: week's events. I mean, for one, we'll probably reduce our
Speaker 1: individual exposure anyone counterparty even more. Um. It gets difficult
Speaker 1: because there are not a lot of large exchanges with
Speaker 1: good liquidity that you can trust. And then we've also
Speaker 1: started the very initial conversations of like around okay, do
Speaker 1: we take our flagship fund and only interact on decentralized
Speaker 1: options uh to to mitigate the central the centralized counter
Speaker 1: party risk. Um. So that's early stage discussion. But because
Speaker 1: we run the market neutral DE five fund, we have
Speaker 1: all the technical infrastructure in place too, self custody our
Speaker 1: flagship fund and you know, only interact on uh, you know,
Speaker 1: on chain and Sadie, maybe you can just, um just
Speaker 1: to go back to the basics, basically, tell us more
Speaker 1: about you guys company, how you got interested in crypto,
Speaker 1: and maybe you can even fold in a bit about
Speaker 1: your background and Nicho's background, because you guys both have
Speaker 1: very interesting, um sort of past lives before your your
Speaker 1: crypto lives. Sure happy to kind of give a little
Speaker 1: more color about our background. Um So I'm the co
Speaker 1: founder of strict Slevive and and UM originally founded the
Speaker 1: company with Jesse Proudman about five years ago. And I
Speaker 1: met Jesse when I went to work UM for him
Speaker 1: at his last startup, UM, which was a private cloud company.
Speaker 1: I was financial controller there. That company was acquired by
Speaker 1: IBM in so I stayed on led the integration of
Speaker 1: the accounting and finance operations teams into Big Blue. Didn't
Speaker 1: really love UM going into a three sixty thou person
Speaker 1: company after being in a sixty person startup. And Jesse
Speaker 1: was a distinguished engineer at IBM, so he UM. You know,
Speaker 1: he ended up in their blockchain group and really fell
Speaker 1: down the crypto rabbit hole, as we all do. We'd
Speaker 1: stay good friends. So I knew he was getting more
Speaker 1: and more into crypto and you know, dabbling and mining
Speaker 1: and trading UM, but then really really got passionate about
Speaker 1: trading and from as a technologist, felt like that was
Speaker 1: a huge opportunity UM. So approached me towards the end
Speaker 1: of seventeen and said, hey, I've got this business idea. UM,
Speaker 1: what do you think You knew that we needed to
Speaker 1: have structure and operations and legal and compliance. But that's
Speaker 1: all stuff that he finds UM as exciting as watching
Speaker 1: paint dry. So he's like, hey, can you know, do
Speaker 1: you want to do this? I know that's kind of
Speaker 1: your wheelhouse. So that's how we started. I was really
Speaker 1: looking at trading in the space and you know, individually trading.
Speaker 1: Back at that point in time in crypto, it was
Speaker 1: impossible to capture any kind of UM gains efficiently. You know,
Speaker 1: you could see the price discrepancies across different exchanges, but
Speaker 1: by the time you could actually execute a trade, there
Speaker 1: was no profit left in it. You know, you couldn't
Speaker 1: trade by a p I or if you did trade
Speaker 1: by a PI, you know, trades were dropped or double filled,
Speaker 1: or would look like they weren't filled, and then two
Speaker 1: days later they'd show up as completed. And so it was.
Speaker 1: It was just super inefficient. So UM we started a
Speaker 1: launch of fund um with actually Jesse as the main
Speaker 1: investor to start and some of his friends and then
Speaker 1: m built the trading technology at the same time. UM
Speaker 1: launched the fund, the first fund in April ofen and
Speaker 1: by then realized that our technology was just as valuable
Speaker 1: UM as as our fund methodology was. So UM and
Speaker 1: stepping back a little bit. After we we formed the
Speaker 1: company officially in January, we realized we needed somebody with
Speaker 1: much deeper finance UM skill set than we had. So
Speaker 1: that's where we were introduced through a friend to Nico
Speaker 1: and it was you know, it was as soon as
Speaker 1: we met Nico, we we knew like, this is this
Speaker 1: is the person that we're going to grow this company with.
Speaker 1: So um he joined really early on as well. So
Speaker 1: when you know, when we went live and April and
Speaker 1: bought our first bitcoin, which the price at that point
Speaker 1: in time was nine thousand dollars UM thereabouts. UM, you know,
Speaker 1: Nico was there placed our first trade. So it's been
Speaker 1: pretty awesome to have him at the Helm since then. Yeah, Nico,
Speaker 1: why don't you why don't you take it from there?
Speaker 1: How did you end up in this rabbit hole? Uh?
Speaker 1: What's your what's your back story? Yeah? Absolutely, um, so high.
Speaker 1: I ended up in the rabbit hole of crypto as
Speaker 1: I used to be in the U. S. Military spense
Speaker 1: of time over in Iraq and Afghanistan. Um it was
Speaker 1: around two thousand and ten. I think it was the
Speaker 1: first time I read about bitcoin. UM. I did not
Speaker 1: put everything I had into it, or I'd be retired
Speaker 1: on an island right now. But I was entirely fascinated
Speaker 1: by this concept of decentralized currency that had no intermediaries
Speaker 1: and no overarching control. I mean, it was very hard
Speaker 1: to sit in Iraq and looking around at the you know,
Speaker 1: the complete collapse of their infrastructure and not see the
Speaker 1: value add um, which is not as easily visible from
Speaker 1: the streets of the US where we don't have to
Speaker 1: worry about those things. Yeah, what I'd like to rewind
Speaker 1: a little bit and get back to the idea of
Speaker 1: defy um. You know, as you point out UM, I
Speaker 1: feel like defy has a bit of a told you
Speaker 1: so a moment right now after what happens to a centralized,
Speaker 1: huge important player like f t x UM. So I'm curious,
Speaker 1: where are the opportunities in defy that are most exciting
Speaker 1: to you guys, and especially in the you know, the
Speaker 1: notion of yield farming. I feel like that seemed to
Speaker 1: get pretty toxic after the collapse of of Terra and
Speaker 1: it's it's anchor program. UM. So what you know, is
Speaker 1: yield farming too risky these days? Or or there or
Speaker 1: their places where you know, it's still attractive. Uh and
Speaker 1: and sort of what projects what you know? Are you
Speaker 1: are you finding the opportunities in these days? Yeah, definitely,
Speaker 1: hadn't I told you moment here, Kase. Everybody who operates
Speaker 1: on de FI is sitting with their own capital, in
Speaker 1: their own self custodied wallets and not worrying about some
Speaker 1: third party stirring off the their funds um and do
Speaker 1: any illicit things with it. Um. So definitely, and I
Speaker 1: told you so a moment. In terms of your farming,
Speaker 1: there's still plenty of opportunities out there. I mean, this
Speaker 1: is we're very early stages. I know at this point.
Speaker 1: You know, Bitcoin has been around for you know, it's
Speaker 1: it's been almost thirteen years now since the White paper
Speaker 1: originally came out, But all of these additional use cases
Speaker 1: around the centralized finances are still in their infancy. So
Speaker 1: you know, if the trillions of dollars of global economy,
Speaker 1: even if it captures one percent of it, you know,
Speaker 1: the opportunity is still quite massive. Um. And so the
Speaker 1: opportunity still remains, and we're still pretty bullish on it. Nico.
Speaker 1: Can you talk a little bit more about what you
Speaker 1: guys are doing right now? Maybe you can give us
Speaker 1: just a bit more specifics. I know, and the notes
Speaker 1: you had sent to us, which granted you sent before
Speaker 1: everything happened, but you said that there are potentially some
Speaker 1: areas in the space that are undervalued. So can you
Speaker 1: just tell us a bit more about that from an
Speaker 1: undervalued or overvalued perspective? Like one of the reasons we
Speaker 1: built the system we did on the flagship funds because
Speaker 1: that is an impossible number to peg um. You know,
Speaker 1: she's bit coined, be a million dollars or a thousand
Speaker 1: dollars or less, like no one really knows, and it's
Speaker 1: dependent on future IDIO seeing credit events involving the decisions
Speaker 1: by governments all around the globe. So it's extremely difficult
Speaker 1: to you know, put a number on that. Undervalued in
Speaker 1: the sense that I think people are writing off DeFi
Speaker 1: after the last year year and a half because of
Speaker 1: the blow ups and the collapses and the amount of
Speaker 1: money that has been lost is where things are undervalued. Um.
Speaker 1: You know, these systems are in therifancy, they're not user friendly,
Speaker 1: but if those problems get solved, you know, there's a
Speaker 1: ton of value in removing intermediaries and creating a more
Speaker 1: frictionless um you know, financial system. And again, you know,
Speaker 1: this goes back to discovering this when I was in Iraq. Like,
Speaker 1: this means a lot more to somebody in Africa or
Speaker 1: the Middle East or other parts of the world, and
Speaker 1: it does to us sitting in America, Like, we're not
Speaker 1: I'm not particularly concerned about my bank going to zero
Speaker 1: dollars and stealing my money or the US government, you know,
Speaker 1: collapsing in the next five or ten years. But that
Speaker 1: is a really real concern for many people around the globe.
Speaker 1: What about all coins, because I think you guys also
Speaker 1: were favorable towards certain old coins. Yeah, we are. I mean,
Speaker 1: you know, it's it's it's hard. I think this whole
Speaker 1: space will look very different in five years than it
Speaker 1: does today, and even more different in ten years than
Speaker 1: it does today. But we that stricts are not particularly
Speaker 1: fond of the idea that there will be one currency
Speaker 1: to rule them all. They think there are reasons that
Speaker 1: multiple currencies will continue to persist, and you know, we're
Speaker 1: particularly excited about the DeFi ones. But you know, decentralized
Speaker 1: identity is another very interesting area that we're looking at
Speaker 1: UM and I think it's kind of necessary to take
Speaker 1: the next step in DeFi. So it's all inter related now,
Speaker 1: I know, is quantz. You guys have your heads in
Speaker 1: the data and you know the algoes and everything. But
Speaker 1: I think what this week really hammered home for me,
Speaker 1: as as well as the collapse of Terra, is how
Speaker 1: important these sort of larger than life personalities can be
Speaker 1: in crypto, you know, whether it's FPF or do Quan
Speaker 1: and especially you know, these flame wars break out on
Speaker 1: Twitter between you know, Do Kuan and his critics and now,
Speaker 1: as you pointed out, Finance and f t X, and
Speaker 1: it's almost like this kind of machismo bravado alpha male
Speaker 1: battle that goes on and really can cause some destruction
Speaker 1: in the in the whole space like we've seen. So Sadie,
Speaker 1: I'm curious how you think about that specifically. You know, uh,
Speaker 1: level headed woman, uh, surrounded by a bunch of bros,
Speaker 1: you know, duking it out on Twitter. How do you
Speaker 1: sort of incorporate the risk of all of that into
Speaker 1: what you do? Yeah, the story of my life being
Speaker 1: a bunch of bros, I mean, being a woman in
Speaker 1: technology to start was was big enough. Uh, you know,
Speaker 1: lack of diversity, and then I went into crypto, you know,
Speaker 1: just because it wasn't bad enough. But you know, I
Speaker 1: have to say I don't work with Brose. I would
Speaker 1: not describe Nico or any of our team is rose
Speaker 1: thankfully they're fantastic. But I have five brothers. That's what
Speaker 1: I meant. He was, Yeah, that five brothers. That's a
Speaker 1: that's a lot of That's a lot of men in
Speaker 1: one room. So really, I mean, Setoci Nakamoto had it
Speaker 1: right by by building this amazing, amazing ecosystem and then
Speaker 1: never revealing his, her or their identity, you know, not
Speaker 1: Setoci is not out there influencing what's happening UM, which
Speaker 1: is truly magical. Like that is the only reason I
Speaker 1: would want to meet them is to find out, like
Speaker 1: how did you when things have gotten so crazy? Sometimes
Speaker 1: like how did you keep your mash up? But you know,
Speaker 1: I think some of these some of these projects where
Speaker 1: the influencers get a little bit larger than life and
Speaker 1: they get a get to you know, too focused on
Speaker 1: their social following UM and less focused on the business.
Speaker 1: That's definitely hasn't ended up being a good thing in
Speaker 1: almost any context. So you know, going forward. It's something
Speaker 1: to really kind of look at more of like, hey,
Speaker 1: who you know, is the head of this project getting
Speaker 1: a little bit too influential? And the holy grail right
Speaker 1: now in crypto is valuation. You know what it what is?
Speaker 1: What are the fundamentals of crypto? What are the fundamentals
Speaker 1: of evaluating any specific crypto asset? And we just we
Speaker 1: don't have that. I mean in traditional markets, you you know,
Speaker 1: you have the c f A society and that's like
Speaker 1: we have experts basically who can value assets and um.
Speaker 1: In crypto, we don't have that. You know, there's just
Speaker 1: everyone kind of uses a different methodology. Everyone has their
Speaker 1: own into mental methodology. But but when it comes down
Speaker 1: to it, there isn't really a tried and true valuation
Speaker 1: methodology for cryptos. So we have to use sometimes some
Speaker 1: of these more like I guess non traditional ways of
Speaker 1: evaluating a project, and you know, the who's leading it
Speaker 1: and how influential they are is probably going to factor
Speaker 1: into that a little bit more than maybe it would
Speaker 1: have previously. You know, social there's a lot of strategies
Speaker 1: out there that use social social sentiment and social indicators. Um,
Speaker 1: you know, I don't I'm not saying we're going to
Speaker 1: go into that direction because we haven't before. But uh,
Speaker 1: it's uh definitely proven in the last six months at
Speaker 1: least to be somewhat of a negative indicator if the
Speaker 1: leader has um a little bit too much of a
Speaker 1: of a voice in a platform, and it definitely makes
Speaker 1: our jobs harder, I think for me and you, Mike
Speaker 1: at least. But but on the on the flip side,
Speaker 1: it's those big personalities that also draw the capital and
Speaker 1: to begin with, you know, so it's it's kind of
Speaker 1: a dual edged sword. I guess. Yeah, that's good point.
Speaker 1: You know, you do need to have that charisma, you
Speaker 1: know people. I was talking to a VC investor recently,
Speaker 1: a very prolific investor here and Europe, and and his
Speaker 1: comment was, I just write checks to people, you know,
Speaker 1: I don't even listen to their idea. If I like
Speaker 1: the person, I think they've got potential, Like I write
Speaker 1: that first check and and then I write the second
Speaker 1: check once I see how good their idea is. UM,
Speaker 1: So you do need that personality for for a lot
Speaker 1: of that money to come in. That's fascinating that that's
Speaker 1: the decision. No one would a single check filled out
Speaker 1: on No, I never have. I certainly never would. But Sadie,
Speaker 1: maybe you can just talk about what some of the
Speaker 1: um in your what in your estimation are some of
Speaker 1: the unanswered questions that we still have with everything that
Speaker 1: happened with FTX. Obviously, the word regulation gets thrown around
Speaker 1: a lot, but it's not so obvious what that might
Speaker 1: actually look like. Do we potentially see more regulation of
Speaker 1: these centralized exchanges? And what else? Does? What else would
Speaker 1: you like answers to? What what questions are out there
Speaker 1: that you'd like answered? Still, so I think really a
Speaker 1: lot is going to come out in the next week
Speaker 1: or two about and about the handling of the situation,
Speaker 1: you know, hindsight bias. We we can go back and
Speaker 1: try to figure out what what happened. Um, it would
Speaker 1: be really great to understand the Alameda um F t
Speaker 1: X transactions and how how some of that came came
Speaker 1: to be. You know, it would be great to understand
Speaker 1: a little bit more why Finance made that offer and
Speaker 1: walked away so quickly. You know, there's there's a lot
Speaker 1: of rumors around that, and you know, but in the end,
Speaker 1: like I don't think we'll ever truly know, we're gonna know.
Speaker 1: You know, there's there's the famous quote, there's what I
Speaker 1: what I remember happened, what you remember happened, and then
Speaker 1: there's what actually happened. So we're going to get a
Speaker 1: lot of that, I think. But the underanswered questions are
Speaker 1: really how are they going to they how are they
Speaker 1: going to deal with it? You know, we've got some
Speaker 1: examples of what I consider to be a really respectable
Speaker 1: way to handle a disaster like this, when with how
Speaker 1: Voyager has handled it. You know, Steve at Voyager I
Speaker 1: think is a very very admirabile person. It was really
Speaker 1: hard to see him go through that. But I feel
Speaker 1: like they have done a really great job of trying
Speaker 1: to be as transparent with their customers as possible. Others
Speaker 1: who I won't say, they say because I don't want
Speaker 1: to say the names, all right, So Celsius is I
Speaker 1: think on the opposite spectrum where, um, you know, what
Speaker 1: they've done to customers is really hard to see, and
Speaker 1: you know, they I don't believe if cared that much
Speaker 1: how it's impacted customers, and the transparency just hasn't been there.
Speaker 1: So you know, I'm really hoping that this f T
Speaker 1: x sit oration resolves and that they can restore confidence.
Speaker 1: And no, no matter what happens, I think you asked
Speaker 1: about regulation. No matter what happens, you know, regulation is coming.
Speaker 1: It's always been coming, especially for for people in the
Speaker 1: United States. Like if you want to be in the
Speaker 1: United States and stay in the United States and being crypto,
Speaker 1: you just have to know that regulations coming. It's just
Speaker 1: a fact of life. And we might not like it
Speaker 1: in some aspects, but but it is there, and it
Speaker 1: is it is a protection for investors, right And you know,
Speaker 1: that whole narrative seems to have shifted over the years.
Speaker 1: You know it it seemed to be at first, you know,
Speaker 1: the lack of regulation in crypto was sort of a
Speaker 1: big selling point, you know, relative to the hundreds and
Speaker 1: pages of regulation and traditional markets. But one thing that
Speaker 1: occurred to me this week is, and it's you know,
Speaker 1: I think it's occurred to others over the years, is
Speaker 1: that crypto seems to be stumbling into the problems that
Speaker 1: rad FI had solved with regulations in the past, as
Speaker 1: as annoying as those regulations can be. And one of
Speaker 1: them that really spring to mind to me this week
Speaker 1: is this notion that you know, well, what is uh
Speaker 1: SPFS empires an exchange? Uh, it was a trading shop.
Speaker 1: And you know within all crypto exchanges, you know there's
Speaker 1: also basically a brokera gentleman as well. Where you know,
Speaker 1: should the regulations go where you know you're either an exchange,
Speaker 1: you're a brokerage, or you're a trading firm and not
Speaker 1: a combo of the threes? Is it too risky to
Speaker 1: sort of have all those businesses, uh, sort of, if
Speaker 1: not under one roof, at least under one sort of
Speaker 1: central control of an individual like SPF. So having separation
Speaker 1: is kind of a basic principle of business. You know,
Speaker 1: really any any you know, SORR, Sarbanes, Oxley and and
Speaker 1: a lot of other um and you know a lot
Speaker 1: of other regulatory requirements really are focused on you know,
Speaker 1: business controls and segregation of duties. And you know, in
Speaker 1: a highly regulated industry there's still you know, moments where
Speaker 1: there's just that temptation to sort of well play in
Speaker 1: the gray areas, and you know, inevitably it tends to
Speaker 1: hurt clients and retail customers and investors. UM. So I
Speaker 1: think there is inevitably going to need to be regulation.
Speaker 1: There's a tendency I think to overregulate in UM in
Speaker 1: situations where you don't understand the nuances of of an industry.
Speaker 1: That is one thing that I worry is going to
Speaker 1: happen right now with with what happened at FTX, I'm
Speaker 1: afraid that, you know, there's going to be a little
Speaker 1: bit of a knee jerk reaction to overregulate. Some of
Speaker 1: those protections are really really important for for our investors.
Speaker 1: And you know, we've always been compliance focused and compliance first.
Speaker 1: We've never you know, we we have an in fully
Speaker 1: engaged compliance firm. UM. You know that's that's on call
Speaker 1: for all of our questions we UM. You know, we
Speaker 1: have two different legal teams that we work with, so
Speaker 1: we're always trying to make sure that we're playing within
Speaker 1: the rules. But UM, there are a lot of people
Speaker 1: out there who who uh feel the opposite. And I know,
Speaker 1: you know, Sam Bankman Freed actually got hazed pretty badly
Speaker 1: recently for for being pro regulation. UM ironically, so go
Speaker 1: along lawyers is the way to play crypto. Well a
Speaker 1: rough week indeed, uh, Nico, I assume you're not ready
Speaker 1: to go back to Iraq after this week but Sadio,
Speaker 1: you tempted to go back to IBM after a week
Speaker 1: like this? Um no, I do joke. That's my fantasy
Speaker 1: occasionally when I'm just like, I worked like a twenty
Speaker 1: hour day and I'm you know, the markets never stopped,
Speaker 1: and I'm like, oh, maybe I'll just go work for
Speaker 1: Amazon Like that just sounds like really relaxing, And then
Speaker 1: I just laugh. I'm like yeah, and in two weeks
Speaker 1: I would be going crazy. I mean, I love, love,
Speaker 1: love love the cryptal world. I love blockchain. I'm so
Speaker 1: passionate about what we're doing. I love going to work
Speaker 1: every day, and I think I would absolutely go crazy
Speaker 1: if I ever had to take a job that was,
Speaker 1: you know, at a big corporation and wasn't playing in
Speaker 1: this space. Wow what a segue, speaking of going crazy. Wow,
Speaker 1: that's really good, right. I think she planned planned that?
Speaker 1: Did you plan that? Sadie? It is that time for
Speaker 1: the craziest things we saw in markets this week? Pretty
Speaker 1: normal week though, nothing crazier, nothing at all. I actually
Speaker 1: have a million things. I have a one million crazy
Speaker 1: I'm gonna need you to narrow that down the one,
Speaker 1: maybe two if you got too many. I have three
Speaker 1: how about that. But one is from a listener, Brian.
Speaker 1: I hope Brian, I'm saying your name correctly. I always
Speaker 1: say that he flat to us that the Ontario Teacher's
Speaker 1: pension hadn't invested in FTX. That was going around Twitter
Speaker 1: as well, the Big pension invested in f Yeah. Yeah,
Speaker 1: for mine, I had so Sam big mun Freed. There
Speaker 1: had been so much about how he was this grand billionaire.
Speaker 1: He had been worth something like twenty six billion dollars
Speaker 1: up until very recently, and he suffered midweek a drop
Speaker 1: to his wealth and he as of Wednesday, I think,
Speaker 1: had been worth somewhere around a billion dollars. On Tuesday
Speaker 1: it had been fifteen point six billion dollars and it
Speaker 1: was the fastest, the biggest one day collapse ever among
Speaker 1: billionaires tracked by Bloomberg. And I think there's speculation that
Speaker 1: he might actually be a negative. Yeah, yeah, yeah, no
Speaker 1: for sure, but just the job is so so yeah.
Speaker 1: He should not go near any Ontario teachers. I would
Speaker 1: have a worried the entire Ontario school system. If how
Speaker 1: about you guys, what's uh slim pickings this week? I know,
Speaker 1: but what's the craziest thing you guys saw this week.
Speaker 1: So I was reading today about this jewel called the
Speaker 1: Fortune Pink, which sold at a Christie's auction is eighteen
Speaker 1: point eighteen carrot pink diamond. Oh it's mine. If I
Speaker 1: put it, well, well done, you did well and that
Speaker 1: so it's sold for twenty point five million dollars. And
Speaker 1: I just kind of laughed a little. Well. I think
Speaker 1: it's funny because every time I'm trying to explain like
Speaker 1: n F T S two or crypto to someone and
Speaker 1: they're like, but how does it have value? And I'm like, well,
Speaker 1: you know, here's somebody paid twenty million dollars for a
Speaker 1: shiny pink rock, Like, I mean, how does that beautiful rock?
Speaker 1: It's true, it's a it's a great that's a great comparison.
Speaker 1: I would say baseball cards. You know what's uh, you know,
Speaker 1: Babe Ruth, baseball cards a piece of cardboard. But you
Speaker 1: know what's the what's the value to a collector? So
Speaker 1: I guess a giant pink rock, especially that's got a
Speaker 1: tire hand out wearing that it tires my hand out
Speaker 1: a lot. Yeah, sure, I'm sure. How about Unico anything
Speaker 1: see this week? Yeah, you know, I was thinking about this,
Speaker 1: and I could not think of anything crazier than what's
Speaker 1: already been a topic. But the CEO of one exchange
Speaker 1: tweeting out that they were going to sell half a
Speaker 1: billion dollars of another exchanges cryptocurrency resulting in a like
Speaker 1: eight hundred styled bank run that completely bankrupted FTX has
Speaker 1: got to be the craziest thing this week. I know,
Speaker 1: the whole the whole show is the crazy. I I
Speaker 1: give it to you, Dico. It sometimes the obvious, in
Speaker 1: plain sight is the winner. But I I think we're
Speaker 1: all kind of speechless after after this week. Wow, I'll
Speaker 1: give you mine, I will say, Uh. The only thing
Speaker 1: that rivals crypto sometimes for for craziness is the art market.
Speaker 1: You know, I love the art market. Um So Paul Allen,
Speaker 1: the co founder of Microsoft past way and his estate
Speaker 1: sold his art collection. So the donna do not look
Speaker 1: over at my notes Here're not looking. Don't look in
Speaker 1: no peeking. But it's time and I regret to inform you,
Speaker 1: Sadie Nico, you're now consistants on our little game show
Speaker 1: here called the prices precise not the price is right.
Speaker 1: This is different but the same with yes, the Bullmarket
Speaker 1: for Lawyers insists that we changed the name. What do
Speaker 1: you suppose the total value when it went up for
Speaker 1: auction at Christie's on Wednesday evening? Total value for Paul
Speaker 1: Allen's art collection? How many pieces are part of it?
Speaker 1: Sixty artworks. I'm gonna go with two hundred and forty
Speaker 1: eight million dollars million dollars. That's a very precise price
Speaker 1: right there. It's a we're playing prices for eight million. Okay.
Speaker 1: The other two contestants, Sadie, what's what's your guests on
Speaker 1: Paul Allen's art collection? So I believe I've heard from
Speaker 1: a couple of people that he was had really great
Speaker 1: taste in art, or he had like quite a collection. Um,
Speaker 1: so I'm gonna I'm gonna go much higher. I'm gonna
Speaker 1: say you your b is in the books, Nico. This
Speaker 1: is your chance to show up the CEO here and
Speaker 1: prove why you deserve to be the chief Investment Officer.
Speaker 1: What's your what's your bid for Paul Allen's sixty piece
Speaker 1: art collection? I remember price prices precise roles are similar
Speaker 1: to another game show you might know. So you could
Speaker 1: go one dollar, you could go one dollar above the
Speaker 1: highest highest bid yep, yeah, I'm gonna go with alright, alright,
Speaker 1: you're all away off the mark. But Nico's closest one
Speaker 1: point five billion dollars for Paul Allen's art collection is
Speaker 1: that nuts one of the biggest ones. Birch Forest by
Speaker 1: Gustav cli Clints. I hope I'm saying that hundred five million,
Speaker 1: one point five billion, that crazy. Yes, I bought it all.
Speaker 1: By the way you hawk that diamond. Yeah, I was
Speaker 1: walking on with my diamond, with my pink diamond, and yeah,
Speaker 1: now you need a bigger apartment to display at all. Yeah,
Speaker 1: Sadie and Nico, we can't thank you enough. I know
Speaker 1: it must have been a stressful week for you and
Speaker 1: you probably, uh, the last thing you wanted to do
Speaker 1: was rehash it all on a podcast, But we really
Speaker 1: appreciate you taking the time and helping us understand what
Speaker 1: a crazy week it was. Yeah, thanks for having us, absolutely,
Speaker 1: thank you for having Yeah, thank you guys, what goes up.
Speaker 1: We'll be back next week and so then you can
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Speaker 1: Thanks for listening, See you next time.